At present, the interest earned on fixed deposits in banks is taxed. This is unfair because:
- People who deposit their money in fixed deposits are risk-averse and seek safety and return on their deposits. Banks do not pay positive real interest;
- bank deposits are fully accounted for and grow day by day. By helping the economy transfer funds from the surplus to the deficit, they speed up industrialisation and enhance the standard of living by advancing citizens loans to acquire assets;
- bank depositors, particularly pensioners and senior citizens, depend on their interest income for livelihood security;
- the government encourages risk-takers in stock markets by not taxing short-term gains and taxing long-term capital gains nominally. These risk-takers should be rewarded or punished by the markets, not by the government.
Also, there is an anomaly in the age limit of senior citizens. At present, individuals aged 65 and above are recognised as “senior citizens”. The superannuation age of employees is 60 years in most cases. The railways, airlines and most state governments consider citizens who have attained the age of 60 senior citizens and offer them concessions.
Therefore, the Income Tax Act should also stipulate 60 years as the criterion for an individual to be recognised as a “senior citizen”.
N Krishnamurthy, Mumbai
